Energy Efficiency: What Are the Laggards Thinking?

Elisa Wood
May 18, 2012 | 10 Comments

Why do some states avoid creating policies that encourage consumers and businesses to save energy? What’s the psychology of the laggards?

A new report by the American Council for an Energy Efficiency Economy sheds some insight as it examines the states that consistently fall behind in the organization’s annual energy efficiency ranking.

The bottom states are: Alabama, Kansas, Mississippi, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, West Virginia, and Wyoming. The good news is that even these laggards are beginning to adopt policies to save energy, according to the report, “Opportunity Knocks: Examining Low-Ranking States in the State Energy Efficiency Scorecard.”

But they still have a lot of catching up to do. And why did they fall behind in the first place?

The report authors, who interviewed 55 stakeholders, found one reason is a general lack of awareness about energy efficiency’s benefits. Another is an aversion to government mandates. But one of the most fascinating barriers is a misperception about energy costs.

Industry folklore says that consumers in states with low electric rates have no motivation to save energy. This folklore discourages policymakers from putting time and money into energy efficiency programs. In truth, these states have good economic reasons to encourage consumers to insulate, install better lighting, and undertake other energy savings measures. It turns out that even though electric rates are low in these states, consumers are paying high monthly bills.

This may sound counterintuitive. But consider these numbers. In Alabama electric utilities charge 10.67 cents/kWh and households pay an average $147.69/month for electricity. Similarly, in South Carolina rates are 10.5 cents/kWh and monthly bills are $137.59/month. Compare Alabama and South Carolina to Massachusetts and California, two states with aggressive energy efficiency efforts. Massachusetts’ electric rates are high, averaging $14.59 cents/kWh, but monthly bills are low, only $97.34. California, too, has high rates of 14.75 cents/kWh and low monthly bills of $82.85.

So electric rates are higher in Massachusetts and California, yet households in those two states pay less per month for power than households in Alabama and South Carolina. This is because they consume less power. Households in the efficient states have an edge; they need less electricity each month to secure the same level of comfort and service in their homes as those in Alabama and South Carolina. So there should be plenty of good motivation for households in the low-rate states to pursue efficiency measures.

Another point of confusion involves the cost to society of investing in energy efficiency. Because it’s generally categorized with other ‘green’ initiatives, energy efficiency is perceived as boutique and expensive. To the contrary, it is cheaper to avoid energy use than to make new electricity, according to ACEEE. Energy efficiency measures cost an average 2.5 cents/kWh while building a new power plant cost 6 to 15 cents/kWh. Because of this cost differential several states now mandate that utilities institute cost-effective energy efficiency before building new generation.

These are arguments, unfortunately, that might get lost in the din of an election year, one in which energy is shaping up to be a major issue. However, as is often the case, the states are leading the way and not relying on federal policy. Even the laggard states are picking up their pace when it comes to energy efficiency, as the ACEEE report describes. More here.

Elisa Wood is a long-time energy writer whose work appears in many top industry publications. See her articles at RealEnergyWriters.com

Image: Photosani via Shutterstock

The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

10 Comments

Allen Gerhardt
May 25, 2012

Yes, Mr Bridges, old houses are terrible for efficiency. Before my wife and I built our present house, we had a house that was built in 1916. The first winter we had to run 3 gas heaters and still felt cold most of the time. I looked in the attic and found zero insulation. I hired a local company to blow in cellulose insulation into the attic for a cost of $350.00 The next winter we were able to remove 2 of the gas heaters. While remodeling we opened up the wall spaces and added insulation and drywall, further reducing heat loss. We replaced old wooden windows with double glazed tight fitting windows, and installed awnings over west windows. By the end of those efforts we were able to eliminate all gas heat and move to a central air and heat electric system. The money saved year after year in electric and gas costs, easily pays back the cost of improvements.

Brooks Bridges
May 22, 2012

@aligatorhardt

I agree biggest is typically for new, but, for example, my own 90 year old house now uses 45% of the heating fuel it did when I bought it. Foam insulation, caulk, and a new furnace. Now, instead of 2 AC's and furnaces I have one each and house is much more comfortable.

The empire state building is now using 2/3 of the energy it did before a major retrofit. They started out with an "always done that way" retrofit then started looking at doing things like super efficient windows. These "extras" cost more but energy savings will pay for the extras in 3 or 4 years. Tenants have found it better lit and more comfortable. (Reference: "Reinventing Fire")

For older buildings you get into ripple effects where adding energy efficient windows, insulation, more efficient lighting (reduced heat) means you can then put in smaller(therefore cheaper) AND more efficient AC and heating systems - major synergism.

Allen Gerhardt
May 22, 2012

Efficiency improvements are most easily done in new construction standards, that outline materials and practices that lower heat gains or losses. This is an area where government codes can be modified to improve overall efficiency. Older buildings can still save money with awnings to cut heat gain through windows, painting roofs with light colored reflective paint, changing windows to double glaze, improving efficiency of climate control equipment, changing lighting, and more.

Brooks Bridges
May 22, 2012

To Eliza Wood:

The failure to address the high electrical requirements for AC in the south would be like comparing fuel oil bills for homes in MA and AL and making a case that AL must be doing something right in energy efficiency because their oil bills are so low.

As my other post shows, I think energy efficiency is extremely important but this article is too simplistic.

Brooks Bridges
May 22, 2012

To Anonymous at 3 of 5:
You say:
"The notion that businesses will "waste" electricity if rates are marginally lower is also disingenuous. The current reality in the US is that unsubsidized electrical power rates are high everywhere. Some states just have rates that are higher than other states. For any large business, the cost for power can be a huge monthly expense. So there is no incentive to "waste" it."

If you do even the slightest amount of research you will find that, on the contrary, many companies ARE wasting enormous amounts of energy. They do this mainly out of simple ignorance - they just assume they couldn't accomplish much. In "Reinventing Fire" the writers give numerous examples of companies who took a hard look at their processes and energy costs and were able to achieve reductions of 30% to 90% with minimal investments. Most businesses are just NOT looking in this area. The whole purpose of writing "Reinventing Fire" was to wake them up to the potential for large improvements in their bottom line simply by a huge reduction in costs of production. And it's not "a penny saved, a penny earned" Saving a dollar on costs is often more like increasing sales by many dollars.

Dennis Houghton
May 20, 2012

From a previous comment
"the more effective approach would be to let free market forces do the work. Consider the example of commercial airlines. Due to high jet fuel prices, commercial airlines voluntarily invest tens of $billions each year upgrading their fleets with newer, more efficient aircraft."

If you reframe the context.

Due to high jet fuel prices, commercial airlines voluntarily declined to install locking, re-enforced cockpit doors as recommended by the FAA to prevent hijacking.In addition to saving the installation cost, not installing the doors saved over 100lbs/aircraft and saved the airline industry tens of millions in extra fuel cost per year. Today's fares are a direct result of that free market decision.
The airlines won the argument until Sept 11, 2001 since then that free market decision to ignore a weak federal regulation has cost us all trillions of US dollars. The airline industry is the best example of an industry the could not possibly operate in a an unregulated free market. Pick a better metaphor to demonstrate the value of the so-called free market.

James Davis
May 20, 2012

I can speak for West Virginia, because I live here, why they are laggards. West Virginia has some of the most abundant fossil fuel resources in America, but yet we are the third poorest state in the nation. We are like that because we allow out side companies come into our state and rape our natural resources and destroy our state and then leave the state and leave us with the expensive clean up and our government is afraid to embrace clean energy because they are afraid it will push these greedy companies out of the state. The gov doesn't realize that if they did embrace clean energy like, mini-nuclear power plants, solar, river wave and wind, more high tech companies could conduct business with virtually no electric bill at all and that higher profit would encourage more business and cheaper electricity for the states residents. My home is as insulated as it can get and my electric bill just keeps increasing and PSC keeps giving the utility companies more increased to maintain their high profit margin, and to keep them from moving out of state and leaving us in the dark. Clean energy can stop all that from happening but yet we refuse to embrace it. Who can understand that kind of mentality?

ANONYMOUS
May 18, 2012

"Why do some states avoid creating policies that encourage consumers and businesses to save energy?"

Those state "policies" really amount to taxes and fees that end up ultimately being passed on to state taxpayers. The notion that the only thing preventing consumers and businesses from utilizing more energy efficient products and practices is simple laziness and stubbornness is just nonsense. Every business owner or consumer that I know would happily embrace energy efficient products if they make financial sense. The real reason most state governments are hesitant to enact regulations forcing consumers and businesses to adopt more efficient, but much more expensive, products and practices is because those consumers and businesses can pack-up and move to a state without them.

The notion that businesses will "waste" electricity if rates are marginally lower is also disingenuous. The current reality in the US is that unsubsidized electrical power rates are high everywhere. Some states just have rates that are higher than other states. For any large business, the cost for power can be a huge monthly expense. So there is no incentive to "waste" it.

Rather than using the failed tactics of creating arbitrary government regulations to manipulate public behavior by force, the more effective approach would be to let free market forces do the work. Consider the example of commercial airlines. Due to high jet fuel prices, commercial airlines voluntarily invest tens of $billions each year upgrading their fleets with newer, more efficient aircraft.

James Nord
May 18, 2012

It's a lack of understanding about how the system work and with the state power companies not offering anything peoples don,t know are care. there a lot of heating with wood and propane than gas and oil

ANONYMOUS
May 18, 2012

The author writes; "So electric rates are higher in Massachusetts and California, yet households in those two states pay less per month for power than households in Alabama and South Carolina. This is because they consume less power."

This is a simplistic analysis and does not demonstrate the author's claim that MA and CA have better energy efficiency. Residents in AL and SC have higher air conditioning needs than most states, and heating with electricity is common in the south whereas if one lives in MA one probably heats with gas or oil.
Steven

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Elisa Wood

Elisa Wood is a long-time energy writer whose work appears in many of the industry's top magazines and newsletters. Her blog on energy efficiency appears on more than 100 sites and has been picked up by the New York Times and Reuters. She...